Question

In: Economics

Suppose we have a sample space: S={E_1,E_2,E_3,E_4,E_5,E_6,E_7 }, with probabilities: P(E_1)=0.05, P(E_2)=0.20, P(E_3)=0.20, P(E_4)=0.25, P(E_5)=0.15, P(E_6)=0.10,...

Suppose we have a sample space: S={E_1,E_2,E_3,E_4,E_5,E_6,E_7 }, with probabilities: P(E_1)=0.05, P(E_2)=0.20, P(E_3)=0.20, P(E_4)=0.25, P(E_5)=0.15, P(E_6)=0.10, and P(E_7)=0.05. Consider the following events with their corresponding set of sample points: A={E_1,E_4,E_6 }, B={E_2,E_4,E_7 }, and C={E_2,E_3,E_5,E_7 }. Note: P(A∪B)=P(A)+P(B)-P(A∩B) P(A∪B)=P(A)+P(B) if A and B are mutually exclusive P(A∩B)=0 if A and B are mutually exclusive P(A^C)=1-P(A) P(A∣B)=(P(A∩B))/(P(B)) P(A∣B)=P(A) if A and B are independent Questions: Find the probabilities: P(A), P(B) and P(C). Find the set of sample points of events A∪B (this is a list of sample points {…}) and find P(A∪B) ? Find the set of sample points of A∩B and find P(A∩B). Now use the formula P(A∪B)=P(A)+P(B)-P(A∩B) to confirm your answer from part (b). Are events A and C mutually exclusive? Find B^c and P(B^c) Calculate P(A∣B) and P(B∣A). Are they the same? Are events A and B independent?

Solutions

Expert Solution

Consider the given problem here “A = {E1, E4, E6}”, => P(A) = P(E1)+P(E4)+P(E6) = 0.05+0.25+0.1 = 0.4, => P(A)=0.4. Similarly, “B = {E2, E4, E7}”, => P(B) = P(E2)+P(E4)+P(E7) = 0.2+0.25+0.05 = 0.5, => P(B)=0.5. Finally, “C = {E2, E3, E5 E7}”, => P(C) = P(E2)+P(E3)+P(E5) +P(E7) = 0.2+0.2+0.15 +0.05 = 0.6, => P(C)=0.6.

Now, “(AUB) = {E1, E4, E6, E2, E7}”, be the sample space. So, “P(AUB)” is given by.

=> P(AUB) = P(E1) + P(E4) + P(E6) + P(E2) + P(E7) = 0.05 + 0.25 + 0.1 + 0.2 + 0.05 = 0.65, => P(AUB) = 0.65”.

Now, “(AUB) = A + B - AB = {E1, E4, E6} + {E2, E4, E7} - {E4} = {E1, E4, E6, E2, E7}. So, “P(AUB)” is given by, where “AB = A intersection B”.

=> P(AUB) = P(A) + P(B) – P(AB) = 0.4 + 0.5 – P(E4) = 0.9 – 0.25 = 0.65, => P(AUB) = 0.65”.

Now, “A = {E1, E4, E6}” and “C = {E2, E3, E5 E7}”, => “AC = {0}”, => “A” and “C” are mutually exclusive events.

Now, “B = {E2, E4, E7}” and the total sample space is given by, “S = {E1, E2, E3, E4, E5, E6, E7}”, => B^c = S-B = {E1, E3, E5, E6}, “B^c = {E1, E3, E5, E6}”. So, “P(B^c) = P(E1) + P(E3) + P(E5) + P(E6) = 0.05 + 0.2 + 0.15 + 0.1 = 0.5, => P(B^c) = 0.5”.

Now, the “P(A|B) = P(AB)/P(B) = 0.25/0.5 = 0.5” and “P(B|A) = P(AB)/P(A) = 0.25/0.4 = 0.625”.

Now, the “P(A)=0.4” and “P(B)=0.5”, => “P(A)*P(B)=0.4*0.5 = 0.2” and “P(AB) = 0.25”. Now, “P(AB)” and “P(A)*P(B)” are not equal, => they are not independent.


Related Solutions

x P(x) 0 0.14 1 0.16 2 0.20 3 0.25 4 5 0.05 6 0.05
x P(x) 0 0.14 1 0.16 2 0.20 3 0.25 4 5 0.05 6 0.05
Suppose we have 3 assets: Expected returns = [0.1 0.15 0.12] Standard déviations = [0.2 0.25...
Suppose we have 3 assets: Expected returns = [0.1 0.15 0.12] Standard déviations = [0.2 0.25 0.18] Correlations = [1 0.8 0.4 0.8 1 0.3 0.4 0.3 1] Find all possible pairwise two-asset portfolios and plot on a backround of random portfolios of all three assets. Comment on the efficient frontier.
Find the equilibrium vector for the transition matrix below. 0.75...0.10...0.15 0.10...0.70...0.20 0.10...0.40...0.50 The equilibrium vector is......
Find the equilibrium vector for the transition matrix below. 0.75...0.10...0.15 0.10...0.70...0.20 0.10...0.40...0.50 The equilibrium vector is... Find the equilibrium vector for the transition matrix below. 0.58...0.12...0.30 0........0.59...0.41 0..........0..........1 The equilibrium vector is... 0.65...0.10...0.25 0.10...0.65...0.25 0.10...0.30...0.60 The equilibrium vector is...
P(W)= 0.3 P(low/W) = 0.50 P(low/S) = 0.10 P(S)= 0.7 P(medium/W)= 0.40 P(medium/S)= 0.25 P(high/W) =...
P(W)= 0.3 P(low/W) = 0.50 P(low/S) = 0.10 P(S)= 0.7 P(medium/W)= 0.40 P(medium/S)= 0.25 P(high/W) = 0.10 P(high/S) = 0.65 BDSC 340.001-3 d) Construct a decision tree for this problem and analyze it. e) What is McHuffter’s optimal decision? f) What is the expected value of the survey(sample) information?
Use the following data X                      f(X) 0 0.10 1 0.15 2 0.30 3 0.20 4 0.15...
Use the following data X                      f(X) 0 0.10 1 0.15 2 0.30 3 0.20 4 0.15 5 0.10 Graph the probability distribution of X Calculate ?" and ?$. Calculate the interval (?" ± 2?"). Superimpose this interval on the graph of the probability distribution of X. Also, calculate the interval (?" ± ?"). What proportion of the measurements will fall within these intervals? Does this result agree with Chebyshev’s Theorem? The Empirical Rule?
Given x = [0, 0.05, 0.1, 0.15, 0.20, ... , 0.95, 1] and f(x) = [1,...
Given x = [0, 0.05, 0.1, 0.15, 0.20, ... , 0.95, 1] and f(x) = [1, 1.0053, 1.0212, 1.0475, 1.0841, 1.1308, 1.1873, 1.2532, 1.3282, 1.4117, 1.5033, 1.6023, 1.7083, 1.8205, 1.9382, 2.0607, 2.1873, 2.3172, 2.4495, 2.5835, 2.7183], write a Matlab script that computes the 1st and 2nd derivatives of O(h^2).
18. There are four scenarios with probabilities 0.05, 0.25, 0.4 and 0.3. A stock fund has...
18. There are four scenarios with probabilities 0.05, 0.25, 0.4 and 0.3. A stock fund has returns -37, -11, 14, 30 respectively, while a bond fund has returns -9, 15, 8, -5 respectively. The correlation between the two funds is (a) -0.49 (b) 0.49 (c) 0.89 (d) -0.89
Rice and beans (–0.25) Rice and wheat 0.50 Rice and chicken (–0.15) Rice and milk (–0.05)...
Rice and beans (–0.25) Rice and wheat 0.50 Rice and chicken (–0.15) Rice and milk (–0.05) Rice and other goods 0 You are a planner for the country represented above. The income elasticity of demand for rice is 0.8.: Is this likely a relatively wealthy or relatively poor country? Why? Use the information above and the homogeneity condition to determine the necessary percentage change in the price of rice that will raise the consumption of rice by 5%. If rice...
Suppose E and F are two mutually exclusive events in a sample space S with P(E)...
Suppose E and F are two mutually exclusive events in a sample space S with P(E) = 0.34 and P(F) = 0.46. Find the following probabilities. P(E ∪ F)    P(EC)    P(E ∩ F)    P((E ∪ F)C)    P(EC ∪ FC)      
Consider the following hypotheses. Upper H0​: p≤0.25 Upper H1​: p>0.25 Given that p=0.3​, n=110​, and α=0.05...
Consider the following hypotheses. Upper H0​: p≤0.25 Upper H1​: p>0.25 Given that p=0.3​, n=110​, and α=0.05 answer the following questions. a. What conclusion should be​ drawn? b. Determine the​ p-value for this test.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT